The principal of a Taiwanese high school has stepped down after students held a Nazi-themed parade ahead of the Christmas weekend, triggering a furore and harsh criticism from Israel.

Photos and videos circulated online of students wearing mock Nazi uniforms while holding swastika flags and banners, some laughing and dancing, during a parade on Friday to celebrate the school's 62-year anniversary.

A teacher also joined in the procession and was seen giving a Nazi salute as he stood inside a tank made of paper cartons, according to local media.

As the students marched, a compere announced: "Here comes Hitler, salute to him students, or the tank will crush you later or you will be taken to the gas chamber," according to a video posted on Apple Daily's website.

As criticism mounted, Cheng Hsiao-ming, head of Kuang Fu High School in northern Hsinchu city, apologised for allowing the parade to go ahead and tendered his resignation.

"I apologise to the victims and the public... We made a mistake and I will take the responsibility to step down," he said Sunday, promising that other school officials would also be punished.

The Israel Economic and Cultural Office in Taipei issued a statement condemning the incident as "tasteless" and "outrageous".

"It is deplorable and shocking that seven decades only after the world had witnessed the horrors of the Holocaust, a high school in Taiwan is supporting such an outrageous action," it said in a Facebook post.

Germany's de facto embassy in Taiwan said in a statement that the students failed to understand that the Nazi symbol stands for human contempt and oppression.

Taiwan's education ministry has also apologised over the incident and demanded the school immediately improve students' history education.

East Asian pop culture and commercial art has a long history of fascination with Hitler and the Nazis.

Occasionally, Hitler turns up in Asian advertisement campaigns, and a pub called "Nazi Bar" briefly operated in Taipei in the 1990s.

In 2011, Taiwan's 7-Eleven came under fire for selling key rings and magnets sporting a Hitler lookalike, but the convenience store chain denied the images were meant to represent the German dictator.